Black Friday Sales

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While it is always tempting to dump on Walmart, there are very sound justifications for subrogation clauses. Assuming no contributory fault, the tort victim is legally entitled to full compensation from the tortfeasor for all past, present, and future costs, including those covered by insurance. The goal, of course, is to make the victim whole. If insurance companies didn’t recover some costs using subrogation clauses, victims would receive a windfall and the rest of us would end up paying for it through higher insurance premiums.

Insurance companies SHOULD (and in some states are required) to discount any subrogation claim by the standard 30%-33% cut that the victim’s lawyer gets in a contingent fee arrangement. It’s unclear whether Walmart did so in this case.

As far as I can tell, the real bad guy here is the victim’s lawyer, who struck a really bad deal for her client, possibly to hasten the laywer’s payout. What kind of settlement only provides for FUTURE costs, without including an allocation for PAST costs? What kind of lawyer doesn’t check for subrogation clauses in her client’s medical insurance?

As a humanitarian matter in this case, Walmart probably did the right thing, since it seems like this woman was the victim of some really bad lawyering. But in general, I want insurance companies to go after their share of settlements and damage awards so as to minimize costs to the system. (And before I get attacked, I am a victim who will have to turn a big portion of my damage award over to my insurance company because of a subrogation clause, so I’m taking the same medicine I’m prescribing).

— AnneS

4. April 4, 2008
1:06 pm

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I partially take back what I wrote about the plaintiff’s lawyer - it wasn’t a REALLY bad deal, just a stupidly careless one. Having the damages paid into a trust account for future care, then writing a letter to Walmart saying the victim had no money to pay because none of it was under her control, was cute, but ultimately very risky, since anyone looking at it afterwards knows that it was a trick. They should have arrived at a written arrangement beforehand - believe it or not, most insurance companies would prefer not to litigate the matter and many are willing to reach an accommodation. Try getting cute, though, and you often just succeed in ticking off the other side and any subsequent judge who has to wade his way through the quagmire.

— AnneS

Some comments after that article Rich. While that was a pretty stupid PR move for walmart let's not pretend they're some evil entity specifically creating ways to screw their employees. It sounds like the lawyer may have made some mistakes which opened the can of worms.